What is DGR?
A deductible gift recipient (DGR) is an organisation or fund that registers to receive tax deductible gifts. When a donation is tax deductible, donors can deduct the amount of their donation from their taxable income when they lodge their tax return.
Not all charities are DGRs. Many men’s sheds chose to register as charities but have not found it necessary to register as a DGR. This is because unless you are receiving donations there is no benefit and Men’s Sheds of WA can auspice donations using it’s DGR status.
You can check if an organisation is registered at ABN Lookup
Benefits of DGR Status
Organisations or agencies who are endorsed (approved) by the Australian Taxation Office (ATO) or named in tax law as ‘Deductible Gift Recipients’ (DGRs) may receive:
- tax deductible gifts, such as financial donations
- tax deductible contributions, such as the purchase of a ticket to attend a fundraising event
- some donor organisations and grant makers can only fund DGRs.
Changes since October 2020
Since October 2020 Men’s Sheds have been encouraged to focus their applications on the ‘Community Shed’ stream of DGR organisations.
“Community sheds (such as men’s sheds and women’s sheds) are not-for-profit organisations that provide a range of activities for their members with the purpose of advancing mental health and preventing or relieving social isolation.”
Eligibility Criteria
A community shed will need to meet all the following criteria to be eligible for DGR endorsement. It must:
- have an active ABN
- have the characteristics of a community shed
- be located in Australia
- registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC)
- have a DGR winding up and revocation clause in the Constitution or Rules.
A community shed is not required to have ‘community’ or ‘shed’ in its name to be eligible for DGR endorsement.
More information and examples around the ‘Characteristics’ of a community shed can be found on the ATO Website
Common Issues
The Men’s Sheds in Western Australia have often used the State ‘Model Rules’ as the foundation of their governance. This has worked well and still does on the state level however to fit the ‘characteristics’ of a ‘community shed’ the rules of your association may need to be amended.
Winding up clause
Some men’s sheds have found that their Constitution or Rules do not have a winding up or revocation clause. This is a clause in your rules of association or constitution that outlines the proposed distribution of surplus property if the association dissolves. It is necessary to have that in place to be approved for DGR status.
Membership process
A community shed must be open to the community to join and generally not impose criteria restricting membership based on matters such as age, ethnicity or background and rejecting an application for arbitrary reasons will not constitute open membership.
Membership may only be restricted in relation to gender or indigenous heritage or both. There are a small number of other exceptional reasons for restricting membership. For example:
- age restrictions in your state or territory
- capacity reached by the shed
- failing a working with children check required by the premises.
The WA model rules contain clauses that describe how new members can join your organisation. These rules require new members to be nominated by a current member and approved by a committee. Nomination and approval rules will only meet open membership requirements where the nomination and approval process results in all new members being approved for membership without restriction or discrimination.
Solutions to the membership process issues
To meet the open membership requirements, you must have a policy and process in place that clearly demonstrates all new members are nominated and approved without exception. This should be reflected in your governing rules. Or you may have a special resolution to change the rules of your association to remove the nomination and approval process. Then supply that information to the Department of Commerce in the Associations Portal.
Apply for DGR
Apply for DGR directly through the ATO
Additional resources
The ATO hosted a webinar on 21 September 2020 to provide an overview of the new deductible gift recipient (DGR) category for community sheds. For your convenience we have published copies of the webinar presentation pack and help sheet they provided.
Help Sheet – providing guidance on meeting the requirements for DGR endorsement. It contains tips and examples that may help when reviewing your governing documents.
Webinar presentation pack – covering what is required to become DGR endorsed, the steps you need to take to apply, and your ongoing responsibilities
Be sure to visit the dedicated ATO Community Sheds webpage for additional support and information on:
- the DGR item number that you need to include in your application
- requirements for your governing documents, including the best way to submit them with your application
- how to apply to be DGR endorsed
- information about tax-deductible gifts and donations
- a recording of their 21 September 2020 webinar session.
Further information
If you have any questions about:
- your DGR endorsement application
phone the ATO on 1300 130 248 between 8.00am and 6.00pm, Monday to Friday - your charity registration
phone the ACNC on 13 22 62 between 1pm and 5pm, weekdays.
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